Archives for category: Money

Two things cannot exist
simultaneously
in the same place

Logic, ‘the correct way of thinking’, starts from the notion that no two things can exist, simultaneously, in the same ‘place’. Not even in our own head… Until they do, actually.

I’ll make a break here and tell you about Oscar Hoffman. A Romanian Teacher.
Who kept telling us, those who had the privilege to hear him teaching,
‘It’s not enough for a proposition to be valid from the logical point of view. It also has to make sense. Epistemologically speaking.’

The bottom part of the picture describes a stance which does make some epistemological sense and is seriously deficient when examined logically.
The top part is logically correct but also includes the meaning hidden in the bottom part.
Let me elaborate.

“100% irrefutable study that is proof and absolutely statistically significant.”
Absolute BS.
No scientific study has ever proved anything. Other than the facts examined confirm, or contradict, the hypothesis being tested during that study. Hence the hypothesis is allowed to stand, temporarily, as a theory or declared to be wrong.
A single study being claimed to be ‘absolutely statistically significant’ is so outrageous that it isn’t worth any comment.
“100% paid studies with an agenda and of little to no value or significance whatsoever”…
Nowadays 99.99% of the studies do involve money changing hands. Scientists have to eat and ‘money’ want to learn things. Hence ‘agendas’, on top of ‘money’.
‘Little to no value’ makes a lot less sense. If those studies yield results without any “value or significance whatsoever”, then why is any money involved and any time spent? To discuss about them, let alone to put them together….
To fit an agenda?
The scientists involved – all of them?!?, “100%” – are frauds and all those paying the hefty sums of money are suckers?
Then how can be explained the huge technological leap and the scientific breakthrough we currently witness?

‘Outlier’ versus ‘General trend’, is a far more ‘logically sound’. But also a lot more vague… The first proposition/picture, when examined with an open mind, does include everything claimed by the science deniers and the conspiracy speculationists. An outlier can be right, all change starts with one, and trends can be wrong. As all of them end up being…

So. What will it be?
Are we going to let ourselves be divided into warring camps?
Or understand ‘superposition’? Accept that having an agenda is not necessarily bad and that money is an excellent servant but a horrible master?
Or continue the current trend? Until we will have killed each-other along the line of divide et impera while repeating at nauseam ‘greed is good’?

Conserving the subjective self-perception

“Objective through shared subjectivity”

‘Popular belief’ posits that ‘objective’ is based on facts while ‘subjective’ is based on whim.
True enough but facts need to be identified as such first and then agreed upon before they become ‘facts’. Before they are recognized as facts by the interested parties. Before they become the foundation for objective knowledge.
On the other hand, ‘subjective’ is indeed personal. A personal ‘take’ on something which has happened inside the same reality where facts take place. In fact, all the facts we agree upon have started their lives as subjective impressions. Which had been shared with other people and eventually stated as facts after ‘negotiation’.
Furthermore, no matter how subjective a perception, all perceptions are perceived using the same senses. And ‘processed’ using the same brains. According to culturally accrued ‘habits’.
Even a hallucination will conserve some degree of normalcy. If of a visual nature, for example, the hallucinatory perception will be experimented and described in visual terms. Pondered upon and discussed with others using the same brain which usually deals with facts. Shared with others using language and evaluated according to ‘customs’.

Self-preservation

According to the Cambridge Dictionary, a rationalization is “an attempt to find reasons for behaviour, decisions, etc., especially your own“.

According to my research, all conscious agents will first attempt to arrange all information at their disposal in such a manner as to conserve the subjective impression they have already acquired about themselves.

Salvation

According to Merriam-Webster, salvation is “deliverance from the power and effects of sin
Having to do with religion, some people will say salvation is subjective by its very nature.
Being understood in the very same way across various cultures and religions, salvation becomes objective.
Not real in the materialistic sense of the word but real in the sense that belief in salvation has very real consequences. Real enough to become material. Set in stone!
Shared belief in Christian salvation has driven people to build churches while shared belief in Buddhist salvation has driven people to build monasteries. The fact that people involved in so different religions as Christianity and Buddhism share their faith in salvation makes salvation an objective ‘thing’.
Makes salvation something ‘natural’.

Self-actualization

According to Abraham Maslow, an American psychologist, for a person to be able to attempt self-actualization that person must have fulfilled all other needs they might have had.
Having fulfilled those ‘previous’ needs is no guarantee for self-actualization being a success, only a prerequisite.

Copernican Revolutions

In a sense, each Copernican revolution humankind has sailed through – of which there have been many – has been a self-actualization.
I’m going to mention three and wrap up this post.

Instrument and possession

Many animals – relatively speaking, are able to use tools. To purposefully alter pieces of matter in order to be more useful towards the intended goal. But nobody except us carry them around.
Furthermore, a lion will defend its pray. And its hunting ground. In a sense, a lion behaves as if it defends its possessions. But only us, humans, talk about possession.
It was us who have conceptualized possession. Who have instrumentalized the notion of property.
This has happened more or less simultaneously with the advent of organized agriculture. Which needs instruments and order. Tools to work the land and the expectation to be able to enjoy at least some of the end-results of your work.

Money and nation

Systematic agriculture has thoroughly transformed human society.
Or, more exactly, the humans who had invented systematic agriculture had to adapt themselves to the new reality brought upon their heads by their own invention.
The spoils of systematic agriculture – abundant food – have created vast opportunities. Some of the people involved in the process were ‘free to do other things but toiling the fields. Hence specialization of work and social division. ‘Professional people’, priests, soldiers.
The source of this new found abundance, and the spoils themselves, had to be protected. And organized…. a.k.a. taken advantage of! Hence ‘rulers’. Arable land had been taken into possession along with the people working the fields. Nation building had begun.
The hoarded produce could be traded. Hence they were. Along with the ‘things’ produced by the ‘professionals’ fed with the accumulated ‘excess’ food.
Trading would have been easier if money was available. Hence it was invented. And used. By traders as a tool for trading merchandise and by rulers as a tool for ruling ‘their’ nations. Which weren’t yet called as such. Only functioning as such…

Rights and reason

Systematic agriculture and trading had been the stepping stones for the advent of ‘industry’. For professional people producing things for sale.
Oekonomy – the art of making ends meet on a yearly bases, as understood by the Ancient Greeks – had become ‘the Economy’. The engine moving society along the passage of time. A process so complicated that a single agent was no longer able to control it. L’etat had become so complex that even Louis XIV could no longer claim it as his own. For the ‘system’ to maintain its ability to function, to go forward, individual agents had to be freed.
Hence the freedom of the market and the human rights.
Hence individual human beings indulging in the habit of thinking for themselves…

Salvation no longer came in an organized manner. According to rules.
To each their own. Reason had been freed once and for all.
Each of us has assumed the freedom to rationalize according to their own wish.
To their own purposes.

To which end?
Only history will tell…
But before proceeding we’d better remember Ernst Mayr’s words.
‘Evolution has nothing to do with the survival of the fittest.
There’s no such thing as ‘the fittest’! The fittest to what since everything changes all the time?!?
Evolution is about the demise of the unfit.’

Until now, evolution has been ‘blind’.
Increasingly, some have become cocky enough to consider they know better. To consider they know where they should lead ‘their subjects’. Lenin, Hitler and Stalin are but a short selection from a long list.
Those who have followed the advice and have facilitated the ‘pestilence’ put in practice by this kind of people are those who have forgotten the deeper meaning of “You must not make any idols. Don’t worship or serve idols of any kind, because I, the LORD, am your God”.

Which ‘God’ brings us back to where we started.
To ‘objective as something agreed upon by many subjective agents’.
You see, I quote the Bible and I mention God quite a lot. And still define myself as being ‘agnostic’.
The fact that I don’t know whether God had actually created the world doesn’t alter the fact that the Bible is a trove of knowledge. As for God’s very existence… things are complicated!
How do you determine whether something exists? You check for the consequences of its existence, right?
A table exists only if you can ‘touch’ it. Since you cannot touch something which doesn’t exist, the fact that you can touch it is a consequence of its existence.
Same with God. Irrespective whether it has actually created the world – or anything else, as a conscious agent – God does exist. People acting as if God was real – people’s faith in God – had and continue to have consequences.
People acting as if God was real have brought God to life. The God we know, talk about and have faith in…

My last affirmation is rather hard to swallow?
Then how about money?
What makes them so valuable? Except for our ‘faith’ in them? Except for our belief, our shared belief, in the ‘fact’ that we are able to get things by paying for them?
And how about ‘rights’?
Do we respect human rights because we believe in them? Or only because ‘that’s the law and there is no other alternative, at least in public’?

See what I mean?
We live in the reality of our own making. And we tinker with it incessantly.
Attempting to make it more and more comfortable. To us!
Each of us tries to make the world ‘a better place’. Each of us working for themselves, each of us according to their ‘own advice’.

Which brings us to ‘how things work’.

Time and time again, reality has told us that we cannot survive, let alone thrive, individually.
That everything we have done is the consequence of us working in concert.
It was our shared belief in ‘money’ which has given us capitalism. Economic effervescence and elevated life standards.
It was our shared belief in God which had convinced us that ‘we were brothers’. And, as brothers, that we should respect each-other. That we should respect each-other’s rights.

Now, that ‘God is dead’ and it has become obvious that ‘capitalism is no better than those who put it into practice’, we have arrived at an inflection point.
Are we able to preserve the true nature of the things which have brought us here?
Or are we going to transform them into idols?

Holidays are very good opportunities to reconsider,
And to learn new things.

These days I learned that while having nothing makes you feel ‘uncomfortable’, having too much can be very limiting.

If you have just enough, you can go forward. Explore new venues. Learn new things.
Enjoy life!

If you have too much, you spend too much time and energy protecting what you already have. Trying to get more…
The venues open for you to explore are suddenly reduced to one! Only one… You become the guardian of your fortune!
Can you enjoy such a life?
Are you sure? Have you examined the alternatives? In earnest?

‘Are you implying that all wealthy people are unhappy?
Unable to enjoy their lives?!?’

On the contrary, my dear Watson!
I’m only saying that being wealthy is complicated.
“Just enough” is a matter of individual ability to cope.
That enjoying wealth needs a lot of skill.
And that being wealthy comes with a lot of responsibility!
Towards yourself in the first place!

And towards your kids, family and the rest of the gang…

The way I see it, capitalism is an environment. A ‘place’.
A ‘way’ for people to do ‘economy’.
What people do in that place depends on the place itself but also on how they choose to do things. This being the reason for which the American capitalism is different from the European one. And both completely different from the Chinese version.
In this sense, capitalism doesn’t actually work. Not by itself!
If those dwelling in this ‘place’ act freely – as in ‘free market’ – then the whole ‘thing’ remains ‘sustainable’. Not ‘good for everybody’, not always ‘nice’ but nevertheless ‘fair’. As in ‘you have a fair chance of reaching the other end’. Not to get necessarily rich but to make the ends meet!

The alternative to capitalism… if you take your ideological blinders off, you notice that there’s none!
Socialist/communist countries are/were also capitalist. The difference being that their economies are/were centrally planned. Their markets are/were anything but free!
This being the reason for which communism had crumbled under its own weight.
And for which in all places where the market is not free enough the ‘thing’ is not sustainable!

Classical economy sees the market as the place where demand meets supply and prices are born.

‘Relative’ economics, which hasn’t been written yet, sees the market as the place where people meet to offer their wares and to fulfill their needs. In order to meet this goal, people negotiate prices and adapt their behavior/attitude.

Classical economics sees the market as being either free or ‘non market’ – a.k.a. ” “planned” economy“: the one which “is heavily regulated or controlled by the government, most notably in socialist or communist countries.
As an aside, while I fully agree with the notion that communist countries – ‘popular democracies’, as their rulers used to describe them, had organized their economies around strictly centralized decision mechanisms, I cannot but wonder how would a classical economist describe Hitler’s economy? Or ‘crony capitalism’?

‘Relative’ economics, which – I repeat, hasn’t been written yet, sees the market as being either ‘free’, ‘un-free’ – a.k.a. ‘captured’ or ‘cornered’, or ‘obsessed’.
Of course, there never was such a thing as a completely free market, only functionally free ones. And I’m sure most of you fully understand what I mean.
Also, it is clear what ‘un-free’ means. Any situation where a small number of people call all the shots for an entire market. It doesn’t matter a bit whether those few people are directly involved in the market – over which they ‘enjoy’ monopolistic power, or they are involved with – read ‘control the’, government. The determining factor here is the scarcity of decision makers and the chock-hold they have over the entire decision making process.
The ‘obsessed’ market is the most interesting of all. For me, at least.


Remember “Tulip Mania”?

As with many interesting stories, there are at least two sides attached to this one also.
One version describes the whole thing as a generalized folly which had ended only after the government stepped in while the other paints a considerably duller picture.
Only nobody denies the fact.

That for whatever reasons, tulip bulbs had been – admittedly for a relatively short while, on a par with houses. Value-wise.

Did it make any sense? Then?
For those involved, yes! Otherwise…
Could they afford it? Had they been affected when the bubble burst?
That depends on whom you ask… and whom you believe…

Does it make any sense now? Can we make anything out of it?

We can certainly explain what had happened.
Holland’s was the most affluent economy of the continent and the wealth was sort of spread around.
A lot of money was ‘sloshing’, a lot of people were looking for a way to ‘show of’ and tulips were the ‘thing of the day’.
Does it make any sense now? Retrospectively, no. Not for me, anyway.
Do we have an explanation for what had happened? You’ve just read a very condensed one. If you need a more elaborate version, try Veblen’s ‘The Theory of the Leisure Class‘.

Anyway, that’s the perfect example of an ‘obsessed’ market.
Where the agents are free to do what they please but are obsessed enough to act in sync. As opposed to ‘in concert’.

‘Obsessed’ means that all present look in the same direction and react in the same way.
Which might be a good thing – when a group tries to escape a fire.
Or a bad one, when the same group is trying to gather food from a forest. If all of them are looking, exclusively, for a single type of mushroom, many other sources of food are neglected.

In a really – as in ‘functional’, free market, people display a variety of behaviors.
Some suppliers are greedier than others, some are diligent, some are sloppy and others are dedicated craftsmen.
Some buyers are more ‘relaxed’, others ‘stingier’. Some know their way around the market, others are ignorant.
On the whole, a dynamic equilibrium is constantly negotiated among all these ‘free’ agents. Simply because there is a variety of opinion.
When the market is ‘un-free’, the whole notion of negotiation and equilibrium disappears. The parameters are set by the ‘rulers’. And things go on only as long as the ‘rulers’ manage to maintain a modicum of normality.
When the market is ‘obsessed’, things become really interesting. The agents maintain their apparent liberty – at least for a while. Only they don’t actually use it. All of them act as if pre-programmed.

And somebody sooner or later notices what’s going on. And turns the whole thing to fit their own goal. Which is, almost always, not so different from the ‘general’ one.

Tulip Mania was relatively benign.
Nothing really bad had happened.

We’ve somehow managed to weather the recent financial melt down.
Which had been the consequence with our obsession with money as the ultimate goal.
Which obsession continues unabated.

Basically, ‘doing business’ means obtaining sustenance by being useful to other people.
As opposed to hunting/picking/growing your own food, building your own shelter and using pelts to cover your back.

‘Doing business’ obviously implies trading. Raw materials are being transformed to fit the needs of the intended customers, transported to where they are needed and offered to those who might buy them.

For this process to take place, ‘business’ needs far more than entrepreneurs, customers raw material and workforce.

It needs a suitable environment.

It needs roads, markets – not only ‘stable’ but also safe, and – maybe the most important thing, it needs the right kind of ‘popular sentiment’.
For business to work as intended, people need to have faith in each-other.

Yep, faith!

Who would eat in a restaurant without trusting that the cook hadn’t spit in the soup?
Who would buy a car to drive their children to school without actually believing that the car had been built as it should have been?
Who would even drive on a two way road without believing that the drivers going in the opposite direction will stay on their side of the road?

And do you really think that German farmers of yore – who had enjoyed a relative safety while working their own land, living at the bosom of an extended family and being personally acquainted with all the members of the community,  would have gladly come to the ‘unknown’ city to become industrial workers  during Bismark’s ‘reign’ without the ‘safety net’ extended by the Chancellor?

Taxes are the manner in which we pay for all these.
But they are much more than this.
The willingness of the people to pay taxes means that they have faith that the money will be well spent. That they have faith that those in charge will spend the money wisely and that, in the end, those in charge will be held accountable.

Whenever any of the parties involved in this deal – or both at the same time, no longer trusts the other to do its part of the deal – or tries to use their position to access undue benefits… things go south. Way south.

Just as it happens in any other deal.

Sometimes yes.
For instance in an economy where cash is readily available some employers might be tempted to split the compensation they give to their employees in two parts. An upfront one – which gets to be reported to the IRS – and a behind the counter one, that is settled directly between the employer and the employee. If a minimum wage is enforced the state knows for sure how much will be the taxable part.
Or in a situation when enough of the employers get together, form a cartel and start lowering the wages so much that the ordinary people end up dying of hunger.

Otherwise…

In fact there are many opinions about how this concept imposes undue constraints upon the economy. Some say it discourages job creation, others say it makes it a lot harder to start a new business and so on…

While all these opinions have their merits, just as the concept itself has its own, I think the situation is a little bit more complicated than this.

For starters I’m going to introduce the concept of ‘priming’.
“Priming refers to the incidental activation of knowledge structures, such as trait concepts and stereotypes, by the current situational context. Many studies have shown that the recent use of a trait construct or stereotype, even in an earlier or unrelated situation, carries over for a time to exert an unintended, passive influence on the interpretation of behavior.”
In other words an established mind set influences both the way we see a certain situation and the decisions we make in certain circumstances.

Minimum wages do exactly that. It both sets our minds in a certain way and establishes a certain set of circumstances.

First of all it tells us that it’s OK to compensate labor as little as possible and then settles an ‘acceptable’ minimum.

I see some of you fretting: “And what’s wrong with paying as little as possible? Are you nuts? I have a bottom line to worry about here!”

Precisely. You should take into consideration the whole picture – the bottom line – instead of short-sightedly aiming your efforts towards short term cost cutting.

Henry Ford taught us a very valuable lesson more than a hundred years ago.
By paying each of the workers more you might end up lowering your aggregate labor costs on the medium time frame.
But there’s more. What Ford did created the conditions for a mentality change. Receiving more money prompted workers to start planning ahead. On $2.25 a day Ford’s workers could afford to work for 3 days a week and spend the rest drinking. On 5 bucks a day they realized they could raise a family. Things changed dramatically. They stopped skipping work and this is how the famous American working middle class was introduced to the world.

The advent of minimum wages turned back the wheels of history. Blue collar employees were returned to the condition of working beasts whose work is no longer evaluated on an individual basis but compensated according to some opaque calculations made by government bureaucrats.
The companies no longer compete among themselves for the best available talent; they just hire anonymous ‘industrial operators’ from a pool of undistinguished semiskilled, disheartened laborers.

The entire economy suffers, from lack of solvable demand and an increasing apathy that doesn’t bode well for the future.

Also, demography doesn’t help any.
I keep hearing that individuals should improve their skills if they want to live better and that mature people who see working for McDonald’s as a life-time career cannot ever expect a ‘decent’ life style since McDonald’s jobs are for students trying to earn some pocket money.
Well… things have changed a little since people who tell this story have been in college.
In those times families had three or four children and about half the jobs were in manufacturing. That meant that the father was the bread winner, mother stayed at home and the students manned the burger joints.
Nowadays most manufacturing jobs have been exported to China, father and mother are both working, part time, in the unglamorous part of the service sector and no longer venture to have more than one or two children.
That’s why McDonald’s has become a lifetime career. For lack of eligible students, first and foremost. Thirty years ago blue collar workers could afford to send their children to college and the students went to McDonald to work for pocket money. Nowadays blue collar workers no longer afford to make many children and don’t have the money to send them to college.

Increasing minimum wage won’t change much. It would only convince the people at the bottom of the society that there is no way out and the CEO’s that there is no need to make any fundamental change in the way they manage the ‘work-force’.
Until employers will start considering their employees as partners instead of adversaries things will remain just as they are now. Or get even worse.

PS. How come so many of us constantly forget that most of the clients – after all they are the ones who keep the economy afloat – are employees?

Deflation ‘for dummies’.